Skip to main content

Rising number of Americans are struggling to pay off their student loans

1.1 million Americans defaulted on their student loans last year, putting them at the risk of penalties.
  • Author:
  • Updated:
    Original:

A rising number of Americans are falling behind on their student loan repayments, while 1.1 million defaulted on their loans last year.

The figures reported by the Consumer Federation of America on Tuesday highlight the serious challenge facing graduates as they struggle to pay down the tens of thousands they still owe for their college education.

It found that millions of people had not made a payment in the past nine months on $137.4 billion worth of loans – putting their balances in default. This is a 14 percent increase from 2015.

Some 1.1 million defaulted on their federal student loans last year, which put them at risk of having their wages garnished, tax refunds seized and failing employment verification checks.

Playing a significant role in the number of defaults is that the average amount owed per federal student loan borrower was $30,650 in 2016. This is a 17 percent rise from the average at the end of 2013, when it was $26,300.

During that same period, average earnings only rose by 8.3 percent.

CFA spokesman Rohit Chopra told the Washington Post that despite a rising stock market and falling unemployment, "the economy remains very difficult for so many young people just starting out."

According to The Associated Press, analysts say students attending expensive graduate programs, state disinvestment in public higher education and an overall rise in the cost of college have contributed to the increase in the average debt owed.

By the end of 2016, 42.4 million Americans owed $1.3 trillion in federal student loans, CFA analysis of education department data shows, which doesn't take into account private student loans, credit cards and home equity loans some use to finance their higher education.

What to do if you fall behind

There are resources available for people who have fallen into default on their student loans, and the first place they should go to is the Consumer Financial Protection Bureau, which has this guide on the options available to loan defaulters.

This includes loan rehabilitation, which takes the loan out of default status provided you can make a monthly payment that is based off of how much money you make (PAYE — pay as you earn) – it can even be as low as $5 per month.

There are also standard repayment plans, which stretches your loan over a 10-year span.

As CBS News points out, there is also help in place for people who lose their jobs, go back to school or become temporarily disabled, who can have their payments put on hiatus through deferral or loan forbearance plans.

You can also go to a PAYE system and have the monthly repayment set at zero. The benefit to this is your loan is still active even if it's not being paid, which is useful if you have a loan where the outstanding balance is forgiven after 20-25 years.

There's also the possibility of refinancing, where a private lender buys your loan from federal providers and gives you a new, lower monthly payment. However, StudentLoanHero notes that in taking your loan out of federal government control you would lose most of the protections the government provides, so this is a decision that should not be taken lightly.

Next Up

walz flanagan lorie shaull flickr

Gov. proposes 'Walz Checks' for most Minnesotans

The governor wants to use $700 million of the state's surplus to fund the payments.

Hutch crash booking photo

Walz, Flanagan call on Hennepin Co. sheriff to resign

"I would say that it is time for him to resign," the Lt. Gov. said.

line 3 enbridge portage lake hubbard county mn tony webster flickr

Months after missing deadline, Enbridge says Line 3 aquifer breach is fixed

The company told Bring Me The News it "successfully stopped the flow of groundwater" at the site.

canada bodies found

Baby, teenager among 4 found dead along MN, Canada border

Authorities believe all four froze to death.

unsplash roller rink skates CROP

Former roller rink, tennis courts will become new sports hub

The Wooddale Fun Zone has been closed since spring of 2020.

hibachi daruma

Popular hibachi food truck opens second Twin Cities restaurant

The much-anticipated Daruma opens for takeout Thursday evening.

20211128_Vikings_49ers_REG12_0144 (1)

What changes are coming to the Vikings' offensive line?

Once again, Minnesota has work to do to figure out its interior spots

Kris Ehresmann

One of Minnesota's key COVID-19 leaders is retiring

Kris Ehresmann has given more than 30 years of her life to public health in Minnesota.

summit beach park orono

Plan to develop Orono park on hold after Daytons object

The Dayton family donated the land to the city for the park in the 1970s.

covid nurse doctor hospital wikimedia commons

Child from Twin Cities, school staff member die from COVID

Both deaths were reported by the Minnesota Department of Health Thursday.

snow

3 clippers will deliver snow to Minnesota through Tuesday

Clippers move through Friday night, Saturday night and again Monday.

Related

Change by government could allow student loan defaulters to be hit with big fees

Around 7 million Americans with student loans are affected by the decision.

Employers could soon start helping you pay off your student debts

A new program allows companies to help employees with student loans.

Feds tell pair of MN colleges: 'No student loans for you'

Globe University, Minnesota School of Business can't accept federal student loan money in 2017

Americans are slow to do their tax returns this year – is a new law to blame?

Around 5.5 million fewer Americans have submitted their tax returns compared to the same period last year.

The Federal Reserve just hiked interest rates – here's what it means

Ir you're looking at student loans, thinking about buying a house, or have a credit card, this is good to know.

The average American credit card holder has a lot of debt

Nerdwallet says the cost of living has grown by 30 percent since 2003.

Lady Dynamite star gives U of M grad $5,000 to help pay off student loans

Maria Bamford with the Minnesota Nice student loan assist.